The Emirates Insurance Association (EIA) has announced that a compulsory 10-year insurance scheme for building projects, providing cover against design and construction defects, will be introduced in the UAE.
Mr Khalid bin Mohammed Al Badi, EIA chairman, said that the association participated actively in laying the foundations of the scheme in cooperation with local insurers. The scheme is expected to be launched this year, reported the newspaper Al Ittihad.
Mr Al Badi also said that the EIA will encourage local insurance companies to pool marine insurance premiums in order to retain as much business as possible within the country instead of placing business abroad.
Currently, the proportion of business placed overseas is estimated at 85% of the total written marine insurance premiums.
He also said that the average age of vessels in the region ranges from 20 to 25 years, and this is a major challenge for insurance companies. The cost of claims is very high while price undercutting has led to unreasonably low insurance premiums.
He demanded that a minimum premium rate be fixed for ship hull insurance and cargo insurance, in addition to a higher ceiling set on brokers' commission in marine insurance.
He said that the EIA is preparing a plan for the Arabisation of marine insurance, especially coverage of ship structures. The plan includes organising training courses in coordination with local and international centres in order to raise the efficiency of marine insurance employees. Experts will be selected to be accredited with the courts to give advice on legal cases and issues involving marine insurance.
Mr Al Badi also revealed that the EIA will push for the establishment of standards for the selection of reinsurance companies, in addition to finding a mechanism to address supervision in this arena.
He regarded the proposed regulation of reinsurance business by the Insurance Authority as an important organisational step required by the UAE insurance market. The standards will also increase the confidence of reinsurers in dealing with insurers.
On the feasibility of establishing an Emirati reinsurance company, Mr Al Badi said: "This is a valuable idea that should be studied because of the huge benefits it can have on the UAE insurance market, which is distinguished by its large size compared to other markets, and taking into account that investment in reinsurers is a long-term investment.”
As for transactions between UAE insurance companies with global reinsurers, and whether the latter deal fairly with local companies, Mr Al Badi said, "The relationship governing insurance and reinsurance companies is an extended relationship, based on trust, understanding and transparency as well as the goal of achieving the mutual interests of all parties.”
He stressed that reinsurers differ from one another in their loyalty to insurers and deal with the latter depending on the strength of the relationship and bargaining power between them. Some reinsurers work with the same insurers over many years, regardless of the losses they might have suffered in some years. Some other reinsurers leave the market completely if they do not achieve their targeted results.